Thai equities are a juggernaut. The MSCI Thai Index has been on an inexorable multi-year rise. Four of the top five performing equities funds sold in Hong Kong are invested in Thai stocks, according to the information company Lipper.
The strong rally in Thai equity markets over the past year has left many battle-scarred investment veterans scratching their heads.
There is a sense of déjà vu about the strong capital inflows, rising financial leverage, and red-hot property markets that Thailand is witnessing. In 1997, it was precisely these trends that precipitated the massive devaluation of the baht, which then triggered the Asian financial crisis and left Thailand virtually bankrupt.
So the question investors might ask is, is Thailand's rally sustainable, or it is just undergoing another bubble that will eventually burst?
I would argue the former. To get to that view, you need to appreciate the strength of investment trends under way in Thailand, and the powerfully positive effect of the recent stabilisation of the country's political situation.
Thailand is at the start of a new investment cycle that is expected to last at least until 2020. The most important driver is a government infrastructure spending programme to the tune of 1.9 trillion baht (HK$498 billion), with the peak of the spending outlays occurring in 2016-17.
The spending is focused on building Bangkok's mass transit system, developing four new high-speed rail routes, and extending capacity at Bangkok's busy Suvarnabhumi airport, among other road and rail projects. The remapping of Bangkok and drastic cuts in commuting times have triggered a housing boom in the capital.
The surge in infrastructure spending has awakened concerns of another boom-bust cycle. But Thailand has fallen behind in infrastructure spending compared with economies such as China, India or even Indonesia. There is ample room for fresh infrastructure spending in Thailand that will have a fully productive impact on the economy.
The timing of the infrastructure build-out is opportune: since the 2011 floods, Thailand has witnessed record levels of inbound tourism, boosted by Chinese visitors and visa-free travel within the Association of Southeast Asian Nations (Asean). The opening of the neighbouring Myanmarese economy since last year is also transforming Bangkok into a key regional flight hub into the northern Asean region. A combination of both trends is straining Bangkok's air capacity.
Last year's Sino-Japanese dispute and the recent depreciation of the yen have played into Thailand's hands, in that Japan is keen to extend its supply chain and raise its export capacity in Asean markets while the yen is cheap. Japanese investment into Thailand, particularly into the carmaking and electronics sectors, has been accelerating.
The recent boom in public and private investment has unquestionably resulted in strong credit growth since 2010, but Thailand's economy and finances appear to be on a firm footing, unlike in 1997.
Thailand's public debt-to-GDP ratio is a modest 44 per cent. Household income is rising, thanks partly to two successive rises of 40 per cent in the minimum wage. And thanks to low global commodity and energy prices, inflation is benign.
The game-changer for Thailand in terms of investor perception came with the election of Yingluck Shinawatra as prime minister in 2011. The credit rating agency Fitch raised Thailand's sovereign rating to BBB-plus in March, on the back of a new political stability.
For investors, the attraction of many Thai stocks is that they appear inexpensive on a regional basis even after the recent rally. This is partly because of rising earnings growth estimates, but largely because of a "political risk discount" on stock valuations, making Thai equities the third cheapest in Asia ex-Japan, after China and South Korea.
These all give strong support to the argument that a sustainable longer-term rally is plausible for Thai equities on the back of the new investment cycle, as long as domestic politics and public finances remain in check.
Carl Berrisford is an analyst for UBS CIO Wealth Management Research